SABMiller to export to Canada, Brazil

SABMiller (SAB) plans to re-enter the Brazilian market next year while also distributing its own beers in Canada, adding two new markets to the group’s Latin American unit.

Latin America is SABMiller’s most profitable region, though the group no longer has a direct presence in Brazil - the world’s third largest beer market. SABMiller last cut ties with Brazil in 2012, when a difficult exchange rate made importing beers inefficient.

AB InBev is also the largest player in Canada, where SABMiller’s North American partner, Molson Coors, will halt the distribution of SABMiller beers from April 2015.

SABMiller will try its hand in Brazil again through a joint venture with the country’s second-biggest player, Grupo Petropolis. In contrast to SABMiller’s prior arrangements in the country, Petropolis had a strong route to market capabilities, SABMiller’s Latin America president, Karl Lippert, told investors.

A good distribution network and in-country production were prerequisites to SABMiller rejoining the market, Mr Lippert said. The companies will target the small but growing premium segment of the Brazilian market. Petropolis will initially produce one of SABMiller’s premium beers, which SABMiller will market in the country and invest in building the brand, Mr Lippert said.

The joint venture had the potential to produce 1-million to 2-million hectolitres annually in Brazil over the next 10 years.

Meanwhile, SABMiller also plans to start exporting to Canada from the US, after Molson Coors’ distribution agreement comes to an end in April next year. The Canadian market will fall under SABMiller’s Latin America region.

Mr Lippert said SABMiller’s Latin American business was likely to experience difficult trading conditions in the near term, as depressed commodity prices weighed on the region’s economic growth. Latin America’s growth is highly correlated to commodity prices, given a large reliance on the extractive sector.

The IMF last month trimmed its growth forecast for Latin America and the Caribbean to 1.3% this year and 2.2% next year.